[Order per : C.N.B. Nair, Member (T)]. - The appellants M/s. Hindalco Industries Ltd. is a manufacturer of aluminium and its product. These goods were liable to central excise duty on ad valorem basis. Accordingly, they cleared the goods after payment of duty during the years 1992-93 to 1997-98. Duty was worked out on the sale prices from the factory to the various buyers. However, two show cause notices dated 22-9-97 and 11-2-2000 were issued subsequently alleging that there was short-levy of duty on account of under-valuation of the goods by the appellants. The order impugned in the present appeal confirmed those duty demands and imposed an amount equal to the duty held as short-paid as penalty. Thus, the impugned order has raised a duty liability of over Rs. 2.0 crores and the same amount as penalty. The ground for confirming the duty demand is that a scrutiny of the balance sheet of the appellants for the years from 1992-93 to 1997-98 showed, that there were outstanding advances in each year to the tune of over Rs. 6.0 crores to Rs. 12 crores in each year. The impugned order has taken the view constituted that since these advances from customers interest free working capital for the appellant, a notional interest on these advances should be added to the sale price of the goods cleared by the appellants for the purpose of determining the assessable value (normal price) of the goods. Accordingly, duty demand has been confirmed taking a notional interest of 18% per annum. The Commissioner has held that such an action is in conformity with the dictum contained in the judgment of the Apex Court in the case of Metal Box India Ltd. [ (S.C.)]. The impugned order has also noted that examination of the records of the appellants by Assistant Director (Cost) of the Department has shown that sale prices were lower on account of the advances.
2. The appellants have contended that the findings reached by the Commissioner are contrary to the facts of the case and are wholly illegal. It is their submission that treating credit balance in the balance sheet as advance is entirely incorrect. It is pointed out that a Balance Sheet indicates the company's assets, liabilities, etc., as on 31st March. This does not mean that credit balances are advances taken for any particular length of time so as to confer any financial benefit on the company. The appellants also point out that the Commissioner has seen only half the picture. As against the credit balance there were much bigger debit balances. The appellants have supplied the contrasting position as under :
| Year | Credit Balance | Debit Balance |
| 1992-93 | Rs. 6.32 crores | Rs. 72.19 crores |
| 1993-94 | Rs. 11.41 crores | Rs. 45.57 crores |
| 1994-95 | Rs. 12.21 crores | Rs. 40.89 crores |
| 1995-96 | Rs. 9.68 crores | Rs. 66.85 crores |
| 1996-97 | Rs. 10.54 crores | Rs. 100.46 crores |
| 1997-98 | Rs. 9.38 crores | Rs. 121.15 crores |
3. It is also the submission of the appellants that the decision of the Apex Court in Metal Box Industries Ltd. had no application to the facts of the present case. In Metal Box India Ltd. case it was found that Metal Box took huge advances from Ponds India, their buyer, and the sale price was 50% of the normal price, on account of this. In view of the price lowering effect of the advances, the Apex Court held that the advance should be treated as an extra consideration which influenced the price and that sale price was not a commercial price. The appellants have pointed out that, in their case, sale was at a uniform price and advance was no consideration in determining the prices. It is their submission that in such a case the correct law was to be found in the judgment of the Apex Court in VST Industries Ltd. case - [1998 (97) E.L.T. 395]. The Apex Court had held in VST Industries case that when sale price is not influenced by advance, the Metal Box decision was not applicable.
4. The appellants have also objected to the introduction of the report of the Assistant Director (Cost) in the adjudication proceeding. It is their submission that such a report was never shown to them or its contents relied upon. They submit that Commissioner has violated the principles of natural justice in relying on a document against them which had not been disclosed to them. Further, they contest the purported findings of the Assistant Director (Cost). It is their submission that price differences between parties is on account of the differences in the goods under sale i.e. differences in the composition of the aluminium alloy.
5. Finally, the appellants object to raising of the demand by taking resort to proviso to Section 11A. It is pointed out that the proceedings have been based on the data contained in the annual Balance Sheets of the appellants which are published from year to year. These are public documents and the department had also access to them. In such a situation it is not tenable for the Revenue to allege that there was suppression of facts, with intent to evade payment of duty, so as to attract the proviso to Section 11A. That proviso relates to cases involving fraud, collusion, suppression of facts, etc., with intent to evade payment of duty.
6. We have perused the records and have heard the learned SDR. Clearly, the impugned order is not tenable. Each one of the objections raised by the appellants against the findings and the way they were reached is required to be sustained. A finding about benefit from advances has been reached without considering any of the relevant factors, as to whether there was a requirement to make payment in advance, the period of advance, the quantum of it etc. The allegation of gain to the appellants has also been made without considering the debit balance. In fact, one look at the debit balance figures would have shown that these are several times (10-12) the credit balance. An order passed by the selective reading of data from a document can hardly be called adjudication. The reliance placed on the Metal Box judgment of the Apex Court was also not correct. The Apex Court itself had gone into the true ratio of that decision, in the subsequent VST Industries case. And the assessee had brought that decision to the notice of the Commissioner. A perusal of that decision would have shown that Metal Box India Ltd. case had no relevance in the facts of the present case. The introduction of the report of the Assistant Director (Cost), through the backdoor is also not permissible or becoming in an adjudication proceeding. Rules of natural justice are not only for the benefit of the respondents in a proceeding, they also protect the adjudicating authority from misreading documents and reaching erroneous conclusions. In the present case, if the report had been disclosed to the assessee, they would have pointed out the errors in the conclusion or inadequacy of its coverage. They could also have cross-examined the Assistant Director, who is in the nature of an inhouse Expert. These essential steps would have enabled the Commissioner to weigh the opinion of the expert and reach a considered conclusion. The expert would also become better in his profession when signed by cross-examination. The avoidance of these vital steps in the adjudication proceedings has led to the passing of a clever-by-half order which cannot survive when tested. Further, the finding of suppression of facts against the assessee is wholly unfair, apart from being incorrect. Balance Sheets of companies is a publicly available document. Therefore, the allegation that data stated in the Balance Sheet was suppressed from Central Excise authorities is not a viable allegation. The demand has to fail on the ground of limitation itself.
7. In the result, the appeal is allowed after setting aside the impugned order. Cross-Objection filed by the Revenue, which is in the nature of written parawise comments on the appeal, is also disposed of.